Recent Posts

About

Rick Aristotle Munarriz has been a Motley Fool contributor since 1995, specializing in tech and consumer stocks. He's been part of the analyst team for the Motley Fool Rule Breakers newsletter service since its 2004 launch, serving as portfolio lead for the real-money Motley Fool Supernova service since its 2012 debut. Beyond amassing close to 20,000 bylines in that time, Rick still finds the time to tend to his collection of travel and entertainment websites through Siteclopedia.com and perform improvisational comedy at Miami's Just The Funny.
Follow Rick's Twitter feed @market or follow him on Google+. He can also be reached at aristotle@gmail.com

Todd Williamson/Invision for Monster Energy Drinks/AP
They're controversial and they're not cheap, but carbonated energy drinks are still growing in popularity. Though traditional soda sales have been sluggish, consumers can't seem to get enough of the fizzy, adrenaline-spiking beverages.

Red Bull and Monster Beverage (MNST) dominate this market, commanding more than 80 percent of the sales in this country. The pesky presence of regulators, politicians, and activists concerned about the long-term effects of consuming these drinks aren't fazing folks seeking a quick burst of energy.

A Monster is Rising

According to Symphony IRI data that was compiled by Bloomberg last summer, U.S. energy drink sales had increased nearly 7 percent to $9.7 billion through the previous 12 months. That's not too shabby for a category coming under fire, but it was some serious deceleration from the better than 30 percent surge in 2011 and still healthy 21 percent pop in 2012.

There was a period when investigations into deaths that might have been linked to energy drink consumption were in the news, but, now that the headlines fare starting to fade, we're back to cracking open Monster Energy cans.

Monster Beverage posted strong quarterly results last week, experiencing a 15 percent surge in net sales. Revenue had only climbed 6.5 percent through the year's first two quarters and 7.3 percent through the first nine months of the year. Clearly top-line growth is starting to accelerate again, and that's good news for the industry in general and Monster in particular.

Just don't mistake Monster's accelerating growth with a renewed interest in flavored sodas.

Cola Wars Run Low on Ammo

The fizzy bubbles for Coca-Cola (KO) and PepsiCo (PEP) are rising too slowly these days.

Coca-Cola reported global volume climbed just 1 percent during the fourth quarter and just 2 percent for all of 2013, and that includes many of the beverage giant's other drink offerings. Carbonated beverage volume actually clocked in flat during the fourth quarter. PepsiCo matched Coca-Cola's flattish volume performance worldwide.

Sugary soft drinks have come under fire, but even diet beverages are failing to deliver the kind of growth that these two soda giants used to routinely deliver. We're drinking water, and not necessarily the "premium" bottled H2O that Coca-Cola and PepsiCo offer.

Consumers are also sipping a lot more coffee these days, but one could argue that the premium java trend is something that would hurt energy drinks more than carbonated beverages. However, the growing popularity of iced coffee and latte beverages -- even at fast food chains that are big sellers of fountain drinks -- is leaving a dent on Coca-Cola and PepsiCo.

Safety Issues

Monster has escaped largely unscathed for now, but it may not be able to dodge trouble forever. Energy drink companies have been battling with other beverage companies about labeling regulations on their presumably functional beverages. Monster is also going on the offensive to promote the generally risk-free nature of consuming its product.

"Millions of Monster Energy Drinks are safely consumed every day," it offered up in a December press release discussing a California legal decision. "Monster is confident that Monster Energy Drinks are safe."

Whether safety is an issue or not, there's no denying that we're back to swallowing down Monster, Red Bull, and other energy drinks at times when we need a little pick-me-up during the day or while working our way through an all-nighter.

The health concerns may never entirely go away. The FDA will let us know if that ever changes. However, energy drinks are now delivering caffeinated boosts for investors who can use a little pick-me-up in their portfolios.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, Monster Beverage, and PepsiCo. The Motley Fool owns shares of Coca-Cola, Monster Beverage, and PepsiCo. Try any of our newsletter services free for 30 days.

Behavioral Finance

Add a Comment

15 Comments

Filter by:

Jessica Prah

With the beverage industry changing, energy waters are also on the rise. HYDRIVE Energy Water combines the light, refreshing flavor of a vitamin water with the energy boost needed during a long workday. At only 30 calories, HYDRIVE Energy Water is the perfect beverage for health conscious customers looking for a boost during their work day or workout. Each formula is designed to provide extra benefits such as vitamin, extra power, and focus.

Our member companies continue to broaden their portfolios to include a wide variety of product choices, portion sizes and calorie counts to meet the individual needs of consumers. Beyond soft drinks, our companies also offer ready-to-drink teas and coffees, water, sports drinks, juices and more. With respect to energy drinks, while these beverages are a growing category they remain a niche product accounting for just under 2 percent of the total U.S. non-alcoholic beverages market. What’s more, in addition to adhering to all FDA guidelines, drink makers take several steps to safeguard consumers. For example, an advisory statement on product packaging clearly states these drinks are not intended or recommended for children, and marketing mirrors this position. That said, it’s important to note that most energy drinks have far less caffeine than a similar size cup of coffeehouse coffee. Also, these beverages have been safely enjoyed for nearly three decades around the world, and in the U.S. for about 15 years. - Maureen Beach, American Beverage Association

During the 1930s there was Coca Cola, and my uncle Henry made everything else including Nehi Orange soda. Later I worked for Crown Cork and Seal making beverage can filling machines.If there is anybody who could fix the Coke mess it's me. Here's an insider secret. The best cola is made by a bottler in Tampa, Florida. It's not Coke or Pepsi.

I have read many of the other comments on this article. Since I did work for one of the major beverage manufactures, I want to clarify a few points. First, the sweetener most commonly used in the US in beverage products is high fructose corn syrup and the type is 55. It is made from corn and supplied by Archer Daniel Midland and Cargill and a few others. Do not want to go into the chemistry, but it is not cane sugar nor does the product taste the same as product that uses cane sugar. The industry did not over night change to 100% high fructose corn syrup. The industry did it gradually so no one would detect the difference in flavor. Second, the can also an evolution. The cans today are less weight than their ancestors. The can is able to withstand certain external and internal affects, but certain parts of the can body are almost paper thin. The industry compensates for this by making the metal in other areas denser. These denser areas then can take weight placed on top. There is the liner inside the can that protects the product from making contact with aluminum. And if that happens there is a chemical and flavor reaction. One could write a book or several books on just what a consumer can do to a product that is beyond the manufacturer's ability to prevent.

This article is meaningless as it relates to percentage increase in sales data for energy drink consumption the reporter used as comparison. First the reporter used SRI data starting from last summer from the previous twelve months and then tried to compare that percentage to annual percentage increases from the previous two years. What a faulty conclusion. That is merely one questionable argument. There may be more, but who wants to take the time?

Several years back when bottled water became big on the scene (and still is) Coke and Pepsiwere actually selling cheaper in some supermarkets than water. So both decided to get intothe lucrative business and simply turned on a hose, boiled the tap water, made up fancy names and they had a product. IE; Aquafina and Dasani and the people bought it like crazy. The biggest cost in these products is not the cost of the product but the shipping cost.with diesel fuel up in the 4 dollar per gallon range the consumer isn't paying for abeverage they are paying for fuel. I am sure both companies will introduce caffeinloaded "energy drinks" (if they haven't already) and be on their merry way being thekings of the beverage world again..

Main reason I have stopped drinking soda is the extreme price hikes. Used to pay $3.99 for a case of 24 Zero Cokes up til just a few months ago. No the price is $5.99 for a case of only 20. $2.00 more a case and the case is 4 short. That's a deal breaker for me. Water from the tap is so much cheaper and I also use the gallon size tea bags and make tea by the gallon. With a touch of baking soda in the brew it lasts up to 5, sometimes 6, days. Much more refreshing and a heap cheaper. Bye, bye Coke and Pepsi!